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To: George Dawson who wrote (23298)	7/13/1999 1:53:00 AM
From: Kerry Lee	Respond to of 29386

ZOOX S1-A Observations and Excerpts: Gadzoox filed new S1_A reflecting latest quarterly results for the June quarter ( 3 months ending June 30/99): - revenues for June quarter increased by 70% from $5.4 million in 1998 to $9.2 million in 1999.HOWEVER, it should be noted that the bulk of this growth is accounted for by channel/distributor/international sales and NOT domestic OEM customers...I wonder how much of this distributor sales is "filling the pipe" versus sell-thru to end users? - gross margins improved to 41% due to switch to Sanmina and customer mix ( greater proportion of channel sales vs direct OEM sales ) - quarterly operating expenses are up to $6.9 million, implying that ZOOX requires quarterly revenues of $17 million to breakeven ( at 40% gross margin ) -bulk of revenues concentrated to 3 customers in latest quarter: ZOOX S1-A Excerpts: <<We depend on a few key customers. In fiscal 1999, approximately 84% of our net revenues came from five customers with sales to Compaq Computer Corporation, Digital Equipment Corporation and Hewlett-Packard Company each accounting for more than 10% of our net revenues. For the quarter ended June 30, 1999, approximately 76% of our net revenues came from three customers with Compaq Computer Corporation (which now incorporates all sales previously reported separately for Digital Equipment Corporation), Hewlett-Packard Company and Bell Microproducts, Inc. each accounting for more than 10% of our net revenues. In fiscal 1998, approximately 69% of our net revenues came from sales to two customers. While we are seeking to diversify our customer base and expand the portion of our net revenues which is derived from sales through various channels, we anticipate that our operating results will continue to depend on volume sales to a relatively small number of original equipment manufacturer customers and distribution channel partners. We may not be successful in our efforts to diversify our customer base.>> <<PAGE> 24 Gross Margin Gross margins increased to $3.8 million, or 41.2% of net revenues, during the quarter ended June 30, 1999 from gross margins of $1.2 million, or 22.7% of net revenues during the quarter ended June 30, 1998. Our gross margin increased primarily due to the following factors: - Our economies of scale increased in the quarter ended June 30, 1999 primarily due to higher net revenues and cost savings achieved by Sanmina Corporation, our current contract manufacturer. - Approximately 28% of our net revenues came from sales to distribution channel customers during the quarter ended June 30, 1999 compared to approximately 6% of our net revenues from our distribution channel customer sales during the quarter ended June 30, 1998. Selling prices to distribution channel customers are typically higher than selling prices to our OEM customers.>>

To: George Dawson who wrote (23298)	7/15/1999 2:29:00 AM
From: Kerry Lee	Read Replies (2) \| Respond to of 29386

RE: EMLX Secondary...I saw your Yahoo post...here's a slightly different take on the timing of EMLX secondary and the price action: 1. FACT: Emulex announced its intentions to do a secondary on April 6/99: << Emulex Corporation Announces A Public Stock Offering COSTA MESA, CA., April 6, 1999 - Emulex Corporation (NASDAQ: EMLX) today announced that it has filed a registration statement with the Securities and Exchange Commission relating to a proposed public offering of 2,100,000 shares of Common Stock, of which 2,000,000 shares will be offered by the Company and 100,000 shares will be offered by a selling stockholder. The Company will not receive any of the proceeds from the sale of shares by the selling stockholder. The Company has also granted the Underwriters an option to purchase up to an additional 315,000 shares to cover over-allotments, if any. An underwriting group managed by BancBoston Robertson Stephens Inc., Dain Rauscher Wessels, a division of Dain Rauscher Incorporated, Morgan Keegan & Company, Inc. and Needham & Company, Inc. will offer the shares. >> 2. Here's the volume/price action of EMLX on the day before/ the day of/the day after the announcement of the Company's intention/filing to do the secondary: 4/5/99 : 66,800 shares / closing price $32 1/4 4/6/99 : 145,800 shares / closing price $34 3/8 (day of announcement ) 4/7/99 : 146,55 shares / closing price $36 1/2 3. The actual EMLX secondary commenced May 20/99, approximately 45 calendar days after the initial filing. The following is the trading volume/closing price on the day before/during/after the actual secondary: 5/19/99 : 101,400 shares / closing price $63 1/4 5/20/99 : 2,055,300 shares / closing price $75 1/2 ( secondary commences ) 5/21/99 : 320,400 shares / closing price $76 5/16 4. Looking at another datacomm ( WAN/telco chips ) company that I used to own, TranSwitch ( TXCC ), here's another example of the "aftermath" of a "dilutive" secondary..many will remember TXCC has another "fallen angel" that fell from the 20's in 1995 down to $2-6 in the 1996-97 period. TXCC is a turnaround story and announced its intention to do a secondary on December 16/98 and the actual secondary commenced on February 9/99: Trading ( shares/closing price ): 12/15/98 316,666 shares / $18 13/16 12/16/98 864,848 shares / $19 13/16 ( announcement/filing ) 12/17/98 306,363 shares / $20 1/16 02/08/99 316,515 shares / $25 7/8 02/09/99 2,264,242 shares / $23 7/8 ( actual secondary commenced ) 02/10/99 591,212 shares / $23 As of July 14/99, TXCC closed at $50 7/8. FWIW, TXCC secondary was handled by BancBoston Robertson Stephens ( main underwriter ), Nationsbank Montgomery and Advest.